Accounting Tips Guides

As we grow from children through the teenage years and into young adults we are taught many things, both from our parents and through school, but the one thing the vast majority of people are never taught is how to budget money. Unfortunately this is the one skill that everyone needs to know. Keeping a proper budget and tracking what your money is doing is the best way to stay out of debt and build wealth.

Money is a powerful tool in life, if we learn to make it work for us. Most people work for their money but once they have it, in their paycheck, more often then not they do not keep track of it once it hits their checking account. Writing down expenditures in the check book register is not keeping track of your money because once it is written in there it is never looked at again.

Learning to budget your money is an important step in your financial health. Once you have written down your income and expenses you will start to see where you money is going and some of it may surprise you. It will be the small expenses that add up the quickest. Spending five dollars on lunch everyday, or that morning coffee you get on the way to work can add up to several hundred dollars a month. That is money that could be doing more good if used more wisely.

Let’s put some math to that. If you spend 5 dollars for lunch a day during the work week that’s $25 a week or $100 a month, give or take $5. Over the course of a year that’s $1200 spent on lunches. If you start adding all the other small expenses that occur every month before long you may find you have enough to pay off any debt you may have but also start saving towards a healthy financial future.

The first step to learning to budget money is writing everything down. Start with you monthly income and write that down at the top of a piece of paper. Now you know how much money you have to spend through the month. Start figuring up all your monthly expenses. This includes everything from your mortgage and utility payments, car payments, credit cards on down to the smallest expenditures. Write these down keeping them in specific categories. Subtract your expenses from you income and see what’s left.

This is your first budget because it shows you what your money has been doing every month. Now that you do indeed have a budget you can look at it becomes much easier to not only see where the money is going but also take back control of where the money is going. And when that happens you can start to set goals, both short term and long term, for your money.

It will take some time to get your money budget dialed in. Most people say that if they stick with it they start to get a firm grasp on their budget and money situation in about 3 months. If you never learned to properly budget money the best way to get started is to just get started.

Andrew Bicknell researches and writes on a variety of subjects. For more information about learning to budget money please visit his website Household Budgets by clicking here

Taxation is a very important aspect of the functioning of civilized society. In that sense, the IRS performs a very significant duty. However, not every taxpayer is perfect in paying their taxes. There are several faults that occur - accidentally, intentionally or out of ignorance - when people file their returns. When this happens, the IRS has no other option but to impose penalties on errant taxpayers. It is important for taxpayers to know about these IRS penalties, because some of them can be quite stiff and really burn a big hole in their pockets.

Here are some of the most popular reasons why taxpayers end up paying penalties to the IRS.

-Late Filing of Returns - Most taxpayers have to pay fines for filing in their returns late. There is always a fixed date for filing of returns, and it is mandatory to file within that date. Even a delay of one day after that would attract the IRS penalty for late filing. Depending on how late your filing has been done, you might end up paying 5 to 25% of the total amount as a penalty for interest.

-Late Tax Payment - Some taxpayers defer on paying the taxes even after they have filed their returns. Paying the dues late also attracts penalties. The penalties here are not that high - you will have to pay 0.5 to 1% of the total tax amount as interest. But it is a penalty that can be easily avoided by making payments on time.

-Underpaying - IRS has laid down specific rules to show incomes and to calculate taxes on that. If you do not adhere to those guidelines and pay lower than the total amount due to you, then there will be penalties to pay if the underpayment is discovered. IRS has good enough means to find out underpaying, and in its viewpoint, this is an inexcusable offence. Penalties are quite high. You might end up paying 20% interest.

-Over-evaluating Taxes - Even over-evaluating the taxable amounts can attract a heavy penalty. You might have to pay as much as 20 to 40% percent in interest depending on the amount you have over-evaluated. That is why it is necessary to show the right amount of earnings within the accounting year.

-Hiding Property and Gift Taxes - IRS has its own means of finding out about the amounts of gifts you have been given in the whole year, and the gifts you have given to other people too. If you have received a gift (especially monetary gifts), then you have to show that when filing returns and pay the due taxes on it. Similarly, you have to pay due taxes on whatever properties you might have. Hiding these amounts could mean penalties of about 20 to 40%.

-Fraud and Deception - Fraud is an unpardonable excuse in the eyes of the IRS. Any kind of deception in filing returns, if exposed, can lead to a penalty of as much as 75%. Of course, cases of fraud can be argued against, but in this respect, the resources of the IRS are much too firmly in place.

These are some of the main IRS penalties that are levied most commonly. If you observe, you will understand that most of them are due to faults in filing returns and in making the actual payments of taxes. That is why, it is better to take the help of a qualified accountant to file your returns rather than handling the process yourself. This will also take some burden off your shoulders.

For more information and advise on avoiding IRS Tax Penalties, please feel free to visit

http://www.irspenaltieshelp.com

This article examines the impact on taxpayers and appraisers as well as their advisors of the new Federal provisions of the Pension Protection Act. For appraisers performing valuations for federal tax purposes in accordance with the Pension Protection Act (PPA), signed into law in August 2006, stipulates new penalties and stiff sanctions if the appraisers or appraisals fail to meet the new qualifications.

The Backdrop

The Congress and IRS, to safeguard the U.S. tax system and force taxpayers to straighten up, have introduced new rules and restrictions that impact lawyers and accountants as well as taxpayers. The Pension Protection Act (PPA) of 2006 establishes severe penalties for unethical conduct on the part of accountants involved in federal tax information consultancy to private firms.

Previously, the government’s targets for tax abuse were various corporate transactions. But now it has trained its guns on the venerable charitable contribution deduction as well. The act attempts to prevent overvaluing the property given to charity to take advantage of the fair market value deduction. According to Section 170(f)(16)(B), Congress has invited the IRS to stop the deduction completely. In the middle of the gun battle are the appraisers who opine for the taxpayers about the values of property that they give to charity.

Qualified appraisers
PPA also requires that appraisals need to be prepared by qualified appraisers.1 A qualified appraiser is defined in the Act to mean a person who has earned an appraisal designation from a recognized professional organization or has met minimum education and experience requirements established by the Treasury Secretary through regulations. An appraiser will not be treated as a qualified appraiser unless the appraiser demonstrates verifiable education and experience for valuing the type of property subject to the appraisal. Also, the appraiser must not have been prohibited from practicing before the IRS at any time during a three-year period prior to the date of the appraisal.

To sum it up, it is now required that an appraiser valuing property for charitable deduction must be trained and experienced and a vague representation by the appraiser will no longer suffice.

Appraisal Impact on Charitable Contributions
PPA has led to an increase in mandatory requirements for appraisals and appraisers to meet Internal Revenue Code Section 170, which covers charitable requirements.

It is now required that all claimed deductions in excess of $5,000 must be accompanied by a “qualified appraisal.” The regulations have duly defined the terms “qualified appraisal” and “qualified appraiser.”

All appraisals to qualify must fully comply with Uniform Standards of Professional Appraisal Practice (USPAP). Those that do not fully comply but are “consistent with the substance and principles of USPAP also satisfy this requirement.

Qualified Appraiser:

According to the Act for a person to be a “qualified appraiser” must meet 5 requirements as laid down in the code. According to these requirements, an appraiser must:

1. Have earned an appraisal designation from a recognized professional appraiser organization
2. Demonstrate “verifiable education and experience” in valuing the type of property subject to the appraisal
3. Regularly performs appraisals for compensation
4. Not appear on the IRS’s disqualification list at anytime during the three years prior to the date of appraisal
5. Meet other requirements [to be] prescribed by Secretary

However there is an exception available to taxpayers when the appraiser fails to meet the Act’s rigorous requirements. The denial of the deduction is inapplicable “if it is shown that the failure to meet such requirements is due to reasonable cause and not to willful neglect.”

Further, Notice 2006-96 states that the designation must be “awarded on the basis of demonstrated competency in valuing the type of property for which the appraisal is performed.” Additionally, the Notice notes that alternative education and experience requirements are met if the appraiser has done each of the following:

1. Successfully completed college or professional level course work that is relevant to the property being valued.
2. Gained at least two years experience in the trade or business of buying, selling or valuing the type of property being valued.
3. Fully described his or her relevant education and experience in the appraisal.

Prevention is better than cure. By adhering to norms and being organized and cautious about the whole process would ensure that you have nothing to fear. Educating yourself about the new law and its implications will further minimize your chances of getting in the way of PPA radar and getting penalized heavily.

Mel Abraham CPA, CVA, ABV, ASA, CSP - author & Adjunct Professor (USD Law School. Further, for access to an audio presentation on IRS penalties and the Pension Protection Act visit http://www.valuationeducation.com/penalties.html. He can be reached at mel@melabraham.com.